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Now, India's turn to dump sugar in Pak

Our Correspondent in New Delhi

The boot is now on the other foot. Pakistan was dumping sugar in India last year until the Kargil episode and now the sugar mills of Pakistan are crying against the prospects of India dumping its surplus sugar in the country.

The moment the Vajpayee government decided last week to allow export of sugar, Pakistan's sugar mills started lobbying with their government to levy a deterrent import duty on sugar to discourage the Indian mills from dumping it in Pakistan.

It was the Indian sugar lobby which successfully persuaded the government to raise the import duty from 5 per cent to 40 per cent in December last year and then to 60 per cent in February to discourage sugar imports. An anti-dumping levy of Rs 85 per quintal was further imposed. This has virtually spelled halted sugar imports.

The Pakistan Sugar Mills' Association, or SMA, is now pressuring Pakistan's military ruler General Parvez Musharraf to raise the import duty on sugar which is pegged at 45 per cent.

The Pakistan government is, however, caught in a difficult situation as there is already a shortage of sugar in the country and the prices may shoot up if it blocks imports. Moreover, Musharraf's difficulty is that he would be effectively helping out relatives of deposed premier Nawaz Sharif who control many sugar mills in the country.

The stocks of sugar in Pakistani godowns have depleted and Islamabad has little option but to import sugar, be it from India or elsewhere.

Import from anywhere else, however, involves transportation by ships which is very costly.

The SMA has alleged that the Indian government had created a situation of sugar dumping in Pakistan by totally withdrawing the excise duty on the production of the sugar meant for export.

Indian sugar would not have become cheaper than Pakistan sugar but for this excise relief given by New Delhi in response to the lobbying by the Indian Sugar Mills' Association, or ISMA, which was worried at sugar stocks piling up in the mills.

While the sugar production has shot up in India continuously for the last three years, it has been declining in Pakistan where production has slumped to 2.7 million tonne. Pakistan's domestic demand is of 3.2 million tonne.

Indian sugar mills are looking at this demand-supply gap of 500,000 tonne in Pakistan and want to take advantage of the situation, especially since the Indian government decided to allow sugar exports up to 1 million tonne.

The government had sought to stress that it would make the Indian sugar prices competitive in the international market when it also extended excise relief.

According to ISMA, the total production of sugar in India is expected to hit the highest ever 17.5 million tonne and stocks with the mills are likely to be around 9 million tonne at the end of the season in September.

The ISMA's plea to the government was that the sugar mills will collapse unless they find buyers for at least a part of this dead stock. The government, thus, decided to allow exports of 1 million tonne. The option of allowing more exports later if needed was also kept open.

The effect of the government making the export sugar totally excise duty free is that while domestic sugar continues to cost around Rs 15 per kilogram, the export price ranges from Rs 9 to Rs 9.50 per kilogram.

The Indian sugar mills can extend advantage of this excise-free sugar to Pakistan by supplying it cheaper by at least $ 20 per tonne as compared to imports from anywhere else, ISMA sources said.

Sugar prices in the international markets today range from $ 235 to $ 240 per tonne. The only port available in Pakistan for importing the commodity is Karachi and this costs another about $ 20 per tonne, the ISMA sources pointed out. They said it would, however, actually cost $ 290 per tonne by the time it reaches the Punjab province through land route, the cost for which works out to Rs 13 per kilogram.

The sugar supplied through Wagah border can, however, be made available to consumers in Pakistan at Rs 12 per kilogram, ISMA sources added.

It will, however, be an injustice perpetrated by the BJP-led National Democratic Alliance government on the Indian consumer who has to pay much more (Rs 16 or more) for the same Indian sugar that is sought to be made available to the Pakistani consumer in Rs 12 per kilogram.

Indian sugar mills would not have secured 100 per cent excise duty relaxation but for the lobbying of Balasaheb Vikhe-Patil, who himself controls cooperative sugar mills in Maharashtra and who is also the Union Minister of State for Finance, sources said.

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